Use the Information for the Question(s)below

question 38

Multiple Choice

Use the information for the question(s) below.
Tom's portfolio consists solely of an investment in Merck stock.Merck has an expected return of 13% and a volatility of 25%.The market portfolio has an expected return of 12% and a volatility of 18%.The risk-free rate is 4%.Assume that the CAPM assumptions hold in the market.
-Assuming that Tom wants to maintain the current volatility of his portfolio,then the amount that Tom should invest in the market portfolio to maximize his expected return is closest to:

• A)72%
• B)92%
• C)110%
• D)140%

---

Definitions:

Employment Screening

The process of verifying the backgrounds and qualifications of job candidates before making a hiring decision.

Polygraph Tests

Examination techniques that measure and record physiological indicators such as blood pressure and heart rate to determine truthfulness.

Reliability

The degree to which an assessment tool or measurement consistently produces stable and accurate results over repeated uses.

Achievement Tests

Tests that measure a person's existing knowledge and skills.